Industrial Engineering Decision-Making Process

Lecture 3-1 Industrial Engineering Decision Making Process Dr. Salam Nazhan Chemical Engineering Department College of Engineering , University of Diyala 2018 1

Outline Definition of decision making Problem analysis Stages in effective decision making Strategic and tactical decision making Models of decision making Decision making under risk Decision tree 2

Decision making Decision making is defined as selection of a course of action from available alternatives for the purpose of achieving desired results. It is an essential leadership skill. If you can learn how to make timely, well- considered decisions, then you can lead your team to well-deserved success. If, however, you make poor decisions, your time as a leader will be brutally short. Every decision making process produces a final choice. 3

Problem analysis It is important to differentiate between problem analysis and decision making. The concepts are completely separate from one another. Problem analysis must be done first, and then the information gathered in that process may be used towards decision making. Problem Analysis, Problems are merely deviations from performance standards. Problem must be precisely identified and described Problems are caused by a change from a distinctive feature. Something can always be used to distinguish between what has and hasn't been effected by a cause. Causes to problems can be deducted from relevant changes found in analyzing the problem. Most likely cause to a problem is the one that exactly explains all the facts. Analyze performance, what should the results be against what they actually are. 4

Stages in effective decision making 1- Define the problem as per the importance, 2- Classify the objectives and identify the problem environment. 3- Search for alternatives. 4- Select evaluation criteria for comparing various alternatives. 5- Select the alternatives. 6- Feedback; Feedback may help management in handling future problems. 5

Stages in effective decision making Objectives must first be established; objectives must be classified and placed in order of importance. Alternative actions must be developed. The alternative must be evaluated against all the objectives. The alternative that is able to achieve all the objectives is the tentative decision. The tentative decision is evaluated for more possible consequences. The decisive actions are taken, and additional actions are taken to prevent any adverse consequences from becoming problems and starting both systems (problem analysis and decision making) all over again. There are steps that are generally followed that result in a decision model that can be used to determine an optimal production plan. In a situation featuring conflict, role- playing is helpful for predicting decisions to be made by involved parties. 6

Strategic and tactical decision making Both strategy and tactics are about deciding the means by which a goal is reached. Decision making happens at all levels in an organization. Major decisions about what is needed to make that vision reality are taken at the next level down, and so on down the hierarchy with those at the very bottom of the pyramid taking decisions about how to best deal with their day to day tasks. Mission; the mission is a vision, a statement of aim or purpose, for the business. Some typical questions one might ask at this level are: "Who are we?" "Why are we here?" "What do we do?" 7

Strategic and tactical decision making Policy;a policy is a broad framework that shapes thinking and guides long term decision-making. Some typical questions one might ask at this level are: "What is happening in the wider social / business environment?" "What kind of company do we want to become / what kind of company must we become?" Strategy;a strategy is concerned with the actions and resources needed to achieve specific long- term objectives. Some typical questions one might ask at this level are: "What conditions need to hold for our business to be viable?" "What products and services will we offer and to what customers?" "What capabilities and capacities will we require?" Tactics; Tactics are concerned with the short to medium term co-ordination of activities and the deployment of resources needed to reach a particular strategic goal. Some typical questions one might ask at this level are: "What do we need to do to reach our growth / size / profitability goals?" "What are our competitors doing?" "What machines should we use? Operations; Operational activities are concerned with the immediate details of how a specific result will be achieved. Some typical questions one might ask at this level are: "What are the buying and selling criteria?" "How will we distribute our products / services?" "How do we collect data on our daily transactions?" 8

Models of decision making Rational model and Simon's normative model. Rational model;proposes that people follow a rational, four step sequence when making decisions. The four steps are: Identifying the problem, generating solutions, selecting a solution, implementing and evaluating the solution. Some of the limitations not considered in this model are issues such as not having enough information relevant to the problem and also the fact that problems can change in a short period of time. The normative model of decision making takes into account the fact that leaders are bound by certain constraints when making decisions. These constraints include personal and environmental factors that reduce rationality, such as time, complexity, uncertainty and resources. There are two basic models used to describe the decision making process; 9

Models of decision making The normative model; suggests that decision making is characterized by; Limited information processing - there is a limit to how much information a person can manage. Judgmental heuristics - shortcuts are used to simplify decision making. (Heuristic refers to experience-based techniques for problem solving, learning, and discovery.) Satisficing - choosing solutions that meet minimum requirements and are "good enough." (Satisficing describes the situation where people settle with a solution to a problem that is "good enough" 10

Decision making under risk In decision making under conditions of risk, we can predict an alternative outcome with certainty, but the outcomes can be specified with known probability values. The value of the probability associated with the event is a measure of likelihood of the occurrence of that event. 11

References Introduction to Industrial Engineering, by Z. Max Shen Industrial Engineering, by N. J. Manck Industrial Management, by Shiv Jhalani Reference Books: 1. Management by Knootz. 2. Management by Griffin. 3. Management theory and Practices by JS Chandan.